Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1


Actual costs
incurred
(Actual inputs
× Actual prices)
(1)




Actual input
× Budgeted price
(2)

Flexible budget
(Budgeted inputs
allowed for actual
outputs achieved)
× Budgeted Prices
(3)
Principal-hours 295 × €108 = €31,860 295 × €105 =
€30,975 600 × €105 = €63,000
Senior-hours
2,360 × € 70 = 165,200 2,360 × € 75 =
0 177,000 1,800 × € 75 = 135,000
Junior-hours
3,245 × € 30 = 97,350 3,245 × € 25 =
81,125 3,600 × € 25 = 90,000
€294,410
€289,100
€288,000


€5,310 U U Total price variance Total efficiency variance


€6,410 U

Total flexible-budget variance Note that U = unfavourable effect on operating income
Overall, O’Connell paid more than the budgeted rate for labour which resulted in an unfavourable price variance. O’Connell also used more than the standard quantity of labour resulting in an unfavourable efficiency variance.
2
Solution Exhibit B presents the total direct service labour mix and yield variances for the five architectural jobs done by O’Connell & Associates. The total direct service labour mix variance can also be calculated as the sum of the direct service labour mix variances for each input. Direct service labour mix variance for each input = Actual service labour input mix percentage – Budgeted service labour input mix percentage Actual total quantity of all service labour inputs used Budgeted price of service labour input
Principal-hours = (5,900 – 6,000)
× 0.10 × €105 = (–100) × 0.10 × €105 = €1,050 F
Senior-hours
= (5,900 – 6,000)
× 0.30 × € 75 = (–100) × 0.30 × € 75
=
2,250 F
Junior-hours
= (5,900 – 6,000)
× 0.60 × € 25 = (–100) × 0.60 × € 25
= 1,500 F Total direct service labour yield variance

€4,800 U
The distribution labour-mix variance is unfavourable because O’Connell used more of the senior-hours service labour than the budgeted mix. The total quantity of all service labour used was less than budgeted resulting in a favourable yield variance.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

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